Kemper Project costs rise another $300 million, delayed until 2016

By Steve Wilson | Mississippi Watchdog

Up, up and away was Superman’s favorite catchphrase. It’s becoming more like the motto for the embattled Kemper Project.

The cost on the coal-gasification power plant known as Plant Ratcliffe is now up to $6.1 billion. That’s well above the originally planned cost of $2.5 billion. and it won’t open until 2016. It was originally scheduled to be in operation this year.

Mississippi Power announced in its 8-K filing and monthly status report to the Mississippi Public Service Commission the cost increases are due to “approximately $20 million related to startup and operational readiness activities and approximately $310 million related to the extension of the project schedule.”

Kemper is a major financial drag on its parent firm, the Southern Company. The company released its 8-K filing Wednesday and losses from Kemper this year amounted to $493 million, with $259 million hitting in just the past three months alone. That reduced the Southern Company’s earnings through September from $2.17 billion to $1.68 billion, a decrease of more than 22 percent.

The Kemper Project consists of three primary components: An on-site lignite mine, the coal gasifier, which converts high-moisture lignite coal into a natural gas-like substance called synthesis gas and a combined cycle plant with power-generating turbines. The 582-megawatt combined-cycle plant has been in commercial operation on natural gas since Aug. 9.

“With construction essentially complete, our focus turns towards the startup of the gasification and carbon capture systems,” said Southern Company president, chairman and CEO Thomas Fanning on a conference call to discuss the company’s earnings. “We believe our recent schedule extension will help preserve the long-term value of this important technology — not just for Mississippi Power customers, but for the U.S. and the world.”

A purely natural gas plant would’ve been much cheaper. According to a 2013 report by the federal Energy Information Administration, a conventional natural gas combined cycle plant with a capacity of 620 megawatts — 38 megawatts more than Kemper’s capacity — would cost $917 per kilowatt. A 600 megawatt integrated gasification combined cycle plant like Kemper would cost $4,400 per kilowatt. That estimate was for a plant that would cost $2.6 billion, less than half of Kemper’s cost.

In August, the Mississippi PSC voted to delay the prudency hearings indefinitely for the Kemper Project. The order said the commission wanted the plant to be in verified, commercial operation before prudency hearings could commence. The hearings will determine whether ratepayers (if the costs with the plant are determined to be prudent) or the company will foot the majority of the bill for the plant.

In another motion, the three-commissioner board that governs utilities in the state also split off prudency for the facility’s combined-cycle generation plant. The PSC will meet Tuesday and the combined-cycle plant filing is on the docket.

According to an agreement reached with the PSC in 2013, the company can only charge ratepayers for $2.88 billion of the plant’s cost. Mississippi Power ratepayers are already paying an 18-percent rate hike in their electricity bills to help defray the costs of Kemper.

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